Geopolitics
Boeing's 30-year sourcing decision last month reflects the sort of long-range thinking that Ford Motor now eagerly wants.
Boeing's jets require tons of titanium. One of the new mid-sized 787 Dreamliner jets that Boeing has been developing under Mulally will be about 10 percent titanium. And most of Boeing's titanium has been coming from Russia.
According to a Russian news report, last month's agreement locks Boeing and the world's largest titanium producer, VSMPO-Avisma, into prices below current market levels -- even as the metal is expected to rise in cost.
But VSMPO-Avisma is about to be acquired by the Russian arms merchant Rosoboronexport. And only days before the Boeing deal, the Bush administration placed Rosoboronexport under a two-year trade sanction for violating an international arms nonproliferation act by selling weapons to Venezuela. In recent years, the Russian company also reportedly sold jets to Iran.
To step through the delicate geopolitical minefield, Mulally relied on his recently retired senior vice president at Boeing, career diplomat Thomas Pickering. Pickering is a former U.S. ambassador to the Russian Federation. To make the titanium deal work, the two gained the support of Russian President Vladimir Putin.
Lean suppliers
The 787 project is huge for Boeing. The company is investing a reported $9 billion in the development of the new lightweight jet -- a figure that dwarfs auto industry development projects. The 787 would be marketed in countries all over the world -- including Russia, not coincidentally.
The project's module suppliers stretch from South Carolina to Italy to Japan. With wings and fuselage pieces designed and manufactured around the world, the jet is more modular than anything else ever built by Boeing, says U.S. lean-manufacturing guru James Womack. Womack has studied and consulted with automakers and aviation companies.
To make the Dreamliner competitive, Mulally spent the past five years embracing Toyota Motor Corp.-inspired lean-manufacturing practices, bringing in outside consultants to rethink Boeing's processes. The company's supply chain was simplified and the number of parts suppliers cut dramatically.
Since 1999, Boeing has slashed its supply base from about 30,000 companies to about 10,000 today. Similarly, Ford has been trying to cut down its own ranks, from about 2,500 suppliers last year to below 1,000 in the next two years.
Ford began that process long before the company went headhunting at Boeing. A year ago, the automaker announced a sweeping new plan to consolidate larger pieces of its global sourcing into the hands of fewer, more profitable suppliers. The selected "strategic suppliers" will be pulled in earlier to Ford's product development projects and will have greater assurance of long-term contracts with Ford, says Tony Brown, Ford's senior vice president of global purchasing.
Slow progress
Ideally, Ford wants its future suppliers to be both technology leaders and world benchmarks in efficiency and quality.
But the culling has been slow. Since the plan was announced 12 months ago, Ford has announced the names of just 36 companies that will make the grade to strategic supplier. Whether Mulally can speed up the process, with his interest in Toyota-style manufacturing efficiency and his experience in whacking away 20,000 suppliers, remains to be seen.
"What Ford gets with him is a decisive leader who knows how to make things happen on an international level," Womack says. "To say he's an expert on the Toyota Production System is a bit of a stretch. But he understands how it works, and he's moved Boeing and its suppliers in that direction."
You may e-mail Lindsay Chappell at [email protected]
